The best way to stay connected to the Android pulse everywhere. Our new app contains all the top Android news, reviews, app & games and the best deals just for you. Now with Disqus profile integration.

Android Authority newsletter

The best way to stay connected to the Android pulse. Our main newsletter is the Android Weekly which is sent every Sunday and contains all the top Android news, reviews and features from the past week.

100% Privacy, No Spam Policy: We value privacy and your email address will be 100% secure. We hate spam just like you do and will never send you too much email, nor will we ever share your information with anyone.

Buy now!

Name:

Subject:

Message:

What’s really happening between Samsung and Apple?

There’s no commercial relationship in the tech industry that is more bizarre than that between Apple and Samsung. The two tech giants are bitter rivals in the market and the courtrooms, but that doesn’t stop them from enjoying a mutually lucrative relationship, where Samsung provides essential components of the iPhone and the iPad.

If you’ve been following us over the past few months, you probably know that the fragile partnership between Samsung and Apple is slowly disintegrating. Apple seems bent to wean itself of Samsung’s services, while the Koreans appear to be torn between the huge profits generated by Apple’s business and the urge to deal a heavy blow to a powerful rival.

In this context, a number of conflicting reports have popped up. A rumor appeared that Samsung will no longer supply displays to Apple starting next year. The rumor was quickly denied. Last week, another report talked about Samsung hiking the prices of the processors it makes for Apple, and again, the rumor was refuted soon after. Meanwhile, Apple is reportedly looking for alternate suppliers of displays, processors, and memory modules.

So, what’s really happening between the two partners? Will they file for divorce? Will they continue their open relationship? Or are they just slowly drifting apart?

Apple refused to renew contracts for processors beyond 2013

A full break up between the two companies is not feasible at this point. It’s very unlikely that Apple will ditch Samsung in the next months, simply because Tim Cook would find it very hard (or even impossible) to find a replacement for Samsung. Plus, there are commercial obligations between the two partners that can’t be abandoned without major expenses.

Still, a complete break up is probable in the future. Analyst Mark Newman from Bernstein Research wrote that Apple has refused to extend long-term agreements with Samsung beyond the end of 2013. This refusal corroborates with earlier reports about discussions between Apple and TSMC regarding processor manufacturing on the 20nm process.

According to a Citigroup research report, TSMC will be the sole supplier of 20nm-based quad-core processors for Apple’s upcoming products. The Cupertino-based company is thus ramping down orders from Samsung, while giving more business to TSMC. The Taiwan-based foundry has already revealed that its 20nm process deployment is ahead of schedule, and the first units will roll off the production lines in early 2014.

In this situation, Samsung is understandably unwilling to continue offering discounts to Apple or to invest in production capacity that is likely to go unused if Apple moves its business to TSMC. The same thing is happening with NAND storage modules, says Bernstein’s Mark Newman. And we can add displays to the list – Samsung is producing an increasingly smaller part of the millions of displays that go into Apple’s devices.

It’s nothing personal

Make no mistake. It’s strictly business, despite what some would have you believe.

Samsung is not looking to stick it to Apple for the billion dollar worth of punishment it received this summer. The Koreans are simply aware that Apple is planning to move their business to its competitors; the writing is on the wall, so why not toughen up and get some extra cash while the customer is still captive?

The idea that Samsung is seeking revenge or compensation for the distress that Apple’s legal team has caused it is great for inflammatory posts, but in real life, neither part can afford the luxury to make decisions based on sentiments.

What’s the impact on Samsung?

Samsung is doing pretty well for itself. The electronics makers is boasting record profits quarter after quarter, buoyed by the booming mobile business, but also by the billions of dollars worth of business that comes from Apple.

Even with its biggest client gone, Samsung will likely have no problem using up its vast production capacity to make components for its own popular devices, from smartphones and tablets, to Chromebooks and Smart TVs.

Apple is already out with all guns blazing when it comes to patents, so the fact that it will no longer depend on Samsung to make its iDevices will mean little in the ongoing legal wars.

We tech bloggers might lose one of the juiciest topics around, comments sections might be consumed by fewer flame wars, but the tech industry will just keep evolving at breakneck speed.